On October 9, 2018, the Commodity Futures Trading Commission (“CFTC”) proposed changes to the registration and compliance obligations for commodity pool operators (“CPOs”) and commodity trading advisors (“CTAs”) consistent with relief currently provided by various staff letters and advisories. Comments are due sixty (60) days after the proposed rule is published in the Federal Register. Some key aspects of the proposal include an exemption for multi-jurisdictional CPOs and family offices as well as an exclusion for certain investment advisors. The proposal also addresses disqualification, solicitation and other relief:
Exemption for CPOs that operate pools in multiple jurisdictions, including the US
The CPO/CTA NOPR would permit CPOs that solicit and/or accept funds from only non-US persons for participation in offshore commodity pools to claim an exemption from CPO registration requirements with respect to the offshore pools, where the only nexus to the US is that the CPO also manages some US derived assets. The amendment would maintain the registration requirement with respect to commodity pools that solicit or accept US domiciled participants.
Proposed CPO and CTA registration exemptions for qualifying family offices
The CPO/CTA NOPR would adopt new CPO and CTA registration exemptions, subject to certain requirements, consistent with existing Commission No-Action Relief to the operators and advisors of asset management vehicles whose clients are limited to a qualifying single family office. This proposed amendment would provide relief comparable to the relief provided by regulations adopted by the Securities and Exchange Commission.
Proposed exclusionary relief for BDCs
The CPO/CTA NOPR would exclude the investment advisors of business development companies (“BDCs”) under terms identical to those under which the investment advisors of registered investment companies are already excluded.
Proposed prohibition on statutory disqualifications
In addition, the CPO/CTA NOPR would prohibit statutorily disqualified persons from operating exempt pools and soliciting and accepting funds and would apply such prohibition to exemptions granted under Commission Regulation §4.13.
Proposed amendments permitting general solicitation by CPOs pursuant to the JOBS Act of 2012
The CPO/CTA NOPR would incorporate exemptive relief granted under CFTC Staff Letter 14-116, which permits the use of general solicitation by qualifying CPOs, as contemplated by the Jumpstart Our Business Start-ups Act of 2012 (as defined above, the JOBS Act).
Relief from Form CPO-PQR and Form CTA-PR
The CPO/CTA NOPR proposes to provide relief from filing Form CPO-PQR to registered CPOs that only operate commodity pools exempt or excluded under certain relief from the Commission and therefore have no meaningful, reportable information. Similarly, the CPO/CTA NOPR would provide additional relief from filing Form CTA-PR to registered CTAs that only advise pools for which the CTA is also CPO.